This guidance note looks at the conditions that must be met in order for a business to recover VAT on costs.
For an overview of input tax more broadly, see the Input tax ― overview guidance note.
For in-depth commentary on the legislation and case law in this area, see De Voil Indirect Tax Service V3.401.
Basics of VAT recovery
For VAT to be recovered by a business (or other VAT registered person), it must:
- •
have incurred ‘input tax’ in the first place
- •
be entitled to recover that input tax
VATA 1994, ss 24, 26; VIT12100
Whether input tax has been incurred
For input tax to have been ‘incurred’ by a business, the following conditions must be satisfied:
- •
the VAT must have been incurred for business purposes
- •
the VAT must have been properly charged
- •
the business must be the recipient of the supply
VATA 1994, s 24(1); VIT10100
Input tax in this context can be VAT incurred on UK supplies
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